The wide variation and the difference of economic development level is one of some

significant reasons for the current struggles of EURO zone.

1. Inequalities between European countries
In 2017, important differences in standards of living between European countries were visible,
but relatively homogeneous levels among the largest member states of the European Union
(figure 1). In most of the Balkan countries, per adult national incomes were below 15,000 euro,
while Southern and other Eastern European countries earned between 15,000 euro and 30,000
euro. In most other EU countries, incomes ranged between 30,000 euro and 45,000 euro.
Luxembourg and Norway, finally, stood out with average national incomes higher than 60,000
euro.

Figure 1: Average national incomes of European countries, 2017

2. Inequalities within European countries
If one looks more precisely at average inequality levels among European regions, differences in
trajectories between our four regions of interest are identifiable (figures 2a and 2b). Top 10%
income shares in Southern Europe were slightly higher than in other regions in the 1980s, but
increased less – income gaps widened in Portugal and Italy, for instance, but remained stable in
Spain. In Northern Europe and Western Europe, on the other hand, inequalities have increased
more linearly. Eastern Europe is finally the area where inequalities have risen the most,
especially at the top of the distribution during the 1990s and the early 2000s. Today, pre-tax
income inequality remains, on average, slightly lower in Northern Europe than in other regions
of the continent.
 Figure 2: Income inequality in European regions, 1980-2017: top 10% versus bottom 50%
average income shares

Source: EU-SILC data.

Figure 3: Income inequality in the EU in comparison to the most unequal member states (Gini
coefficient, disposable incomes)
3. Issues arise with the inequality in the EU
Political debates and conflicts focus primarily on inequality within member states. People worry
about huge income discrepancies within their societies as they are accompanied by social
problems and inequalities of life expectancy, health and many other things. Nonetheless, an
increasing “Europeanisation of income inequality” can be observed, according to some studies
(e.g. Martin Heidenreich “Exploring Inequality in Europe”).
Indeed, the incomes of households in the EU tend to depend more and more on European factors.
EU-enforced austerity policies affected growth, wages and social benefits in Greece, Spain,
Portugal, Ireland and Cyprus. European liberalisation, integration and regulation of markets
determine the economic opportunities of people and companies. From a purely economic point
of view, EU-wide income inequality in an integrated economy has noticeable effects. Poor EU
citizens are likely to migrate to richer member states in order to improve their income chances.
Large companies with the capacity to offshore part of their production processes will locate
labor-intensive manufacturing to low-wage countries. Both processes affect the income and
employment opportunities of low-skill workers in high-wage countries, thus contributing to
higher inequality there.
Politically, the frustrating development of wages and employment in many richer member states
contributed to the rise of nativist populism. Brexit voters have been motivated by the fear of too
much immigration from poorer member states.